Guyana’s commitment to contract sanctity earns country over US$6 billion from oil

Guyana’s oil wealth, concentrated in the Stabroek Block, has transformed the nation’s economic fortune, not only through direct revenues but also through substantial benefits for ordinary people. These benefits show the importance of the government’s principle of contract sanctity and respect for investors.

While the government recognizes that the petroleum agreement for the Stabroek Block is less favorable to Guyana than it could be, the government firmly upholds the principle of contract sanctity.

This has been underscored on numerous occasions by Vice President Dr. Bharrat Jagdeo. Dr. Jagdeo has said, “We pride ourselves in being predictable, fair, and working with the companies in partnership but looking out for national interests.”

He has said that this approach is not merely about honoring one agreement but about preserving the broader investment environment. Respecting contracts is widely known to foster investor confidence, signaling to foreign companies that Guyana is a stable and reliable partner for long-term investment. The Vice President has said that the industry appreciates predictability and non-capricious behaviour.

A predictable and fair investment climate has thus far encouraged further exploration, development, and innovation, ensuring that oil wealth continues to benefit the country across generations. Additionally, it aligns with the PPP’s electoral mandate, reflecting the will of the electorate who entrusted the government with managing this vital sector.

To date, Guyana has earned approximately US$5.5 billion in direct government revenues from oil production, which is being invested into critical infrastructure, healthcare, education, and energy. These revenues have also empowered the government to advance climate adaptation and mitigation efforts, addressing the country’s vulnerability to flooding and other climate-related challenges.

Notably, however, the benefit of the country’s oil wealth does not only come from direct revenues.

When the PPP government assumed office, Guyana lacked Local Content legislation, leaving Guyanese businesses and workers with limited opportunities to capitalize on the oil boom. In 2021, the government introduced the Local Content Act, mandating increased hiring of Guyanese nationals and awarding contracts to local businesses in specific sectors.

This legislation has empowered Guyanese companies to provide basic services as well as offer specialized capabilities. For example, local companies now fabricate steel for floating production, storage and offloading (FPSO) vessels, directly contributing to the infrastructure that facilitates offshore production. Local Content now generates hundreds of millions of U.S. dollars annually for Guyanese businesses and fosters generational wealth.

Further, in 2024, the government enhanced Local Content by increasing the bid evaluation weighting for local companies from 5% to 10%, giving businesses with local content certification a greater competitive edge. Over 800 Guyanese companies have already acquired Local Content certification, and can reap the benefits of increased access to contracts.

Aside from Local Content, there is the benefit derived from oil companies’ corporate social responsibility. One such example is the Greater Guyana Initiative (GGI), funded by ExxonMobil, Hess, and CNOOC. This US$100 million, 10-year initiative supports diverse projects that drive societal transformation. Key examples include:

1. Berbice Stadium Construction: With US$17.7 million from the GGI, the stadium will be able to host 10,000 persons and enhance sports and recreational infrastructure.

2. Accelerate-HER Program: This annual capacity-building workshop is held to train Guyanese women entrepreneurs to become capable leaders.

3. Enhancing Community Wellness Project: This US$45,000 program addresses chronic conditions like diabetes and hypertension, promoting healthier lifestyles through education and awareness.

4. EggSandwich Project: A US$608,000 initiative to boost poultry production in Region 9, reducing livestock import costs and fostering self-sufficiency in hinterland communities.

5. University of Guyana Campus Safety and Security Project: This program upgraded security infrastructure at the Georgetown campus, including new security buildings, electronic systems, and sanitation units, creating a safer environment for students and staff.

6. Centre for Local Business Development: This organization is exclusively focused on building the capacity of companies to support the new Guyana economy.

These initiatives, and others under the GGI, demonstrate the oil sector’s contributions to diverse areas of national development, from health and education to entrepreneurship and infrastructure.

Overall, Guyana’s oil wealth offers benefits far beyond direct financial inflows, driving local capacity building, societal development, and economic diversification. By respecting contract sanctity and maintaining a favorable investment climate, the government ensures that these benefits continue to grow while safeguarding Guyana’s long-term economic health.